UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended 31 December 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________________ to _________________
Commission file number 0-28002
WideBand Corporation
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(Exact name of small business issuer as specified in its charter)
Nevada 87-0363656
-------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
401 West Grand, Gallatin, MO 64640
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(Address of principal executive offices)
(660) 663-3000
---------------------------
(Issuer's telephone number)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of 31 January 2002 WideBand Corporation had 13,488,595 shares of Common
Stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . .3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . .3
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . .4
2
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
See the Company's financial statements attached to this 10-QSB report.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
THE FOLLOWING DISCUSSION OF THE COMPANY'S FINANCIAL CONDITION AND RESULTS OF
OPERATIONS INCLUDES CERTAIN FORWARD-LOOKING STATEMENTS. WHEN USED IN THIS
FORM 10-Q, THE WORDS "ESTIMATE," "PROJECTION," "INTEND," "ANTICIPATES" AND
SIMILAR TERMS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS THAT RELATE
TO THE COMPANY'S FUTURE PERFORMANCE. SUCH STATEMENTS ARE SUBJECT TO
SUBSTANTIAL UNCERTAINTY. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON
THE FORWARD-LOOKING STATEMENTS SET FORTH BELOW. THE COMPANY UNDERTAKES NO
OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY OF THE FORWARD-LOOKING STATEMENTS
CONTAINED HEREIN.
OVERVIEW
WideBand Corporation is a technology development company, which
manufactures tier-one computer networking products. The Company's
Professional Series NICs (Network Interface Cards) and Switches are designed
and built in the USA. This gives WideBand the ability to integrate the
high-performance features the market desires into its products and to implement
very strict standards of quality control in the manufacturing process.
WideBand Corporation faces competition from a number of established
companies in the tier-one industry segment. It is WideBand's philosophy to
enter the market with superior products that offer features and benefits that
will attract users without the need to overly discount pricing. The Company's
Professional Series Gigabit NICs and Switches are designed to work over
Category 5 - and even Category 3 - cabling. This eliminates the need for
rewiring in most installations, thereby greatly reducing the cost of upgrading
to Gigabit Ethernet.
WideBand's Professional Series products include Gigabit Ethernet NICs for
servers and high-performance workstations. The Company also manufactures three
models of Gigabit Ethernet switches: 8-port and 16-port versions that have the
capability of operating over standard Category 5 cabling, and an "8 + 8"
switch, with eight gigabit ports for Cat 5 and eight mini-GBIC slots for
gigabit fiber modules. All three models utilize auto-configuration and have
the ability to be upgraded in the field to operate as managed devices.
WideBand currently offers Layer 2 management, which is designed for small
networks of less than 1,000 computers, on its Professional Series switches.
The Company plans to begin offering Layer 3 management (designed for use at the
heart of very large networks) on several of its Professional Series switches
during the current fiscal year.
WideBand Corporation also markets a line of high-performance servers,
which utilize the fsix Operating System. These servers are unique in that the
hardware is sold with the software already installed. This greatly simplifies
the installation and set-up for the end user. Also, the software is optimized
for the specific hardware used, resulting in substantial performance
improvements. The servers are manufactured by fsix Corporation, which is
3
controlled by the President of WideBand Corporation, Dr. Roger Billings. fsix
purchases Professional Series gigabit NICs from WideBand Corporation for use
inside its server products. WideBand purchases servers from fsix Corporation
and markets them through its Dealer organization.
WideBand has an organization of 187 independent dealers and plans to
increase that number during the coming year.
During the fourth quarter of the last fiscal year, the Company launched a
wholly-owned subsidiary, eGig Corporation, for the purpose of distributing
computer networking products to the small office and home office (SOHO) market.
This market requires high-performance networking products, but at a limited
price. Because of the price requirements, the SOHO market needs a different
kind of product and a different marketing focus than that of the tier-one
market. In order to meet this price requirement, eGig Corporation has its
products manufactured offshore.
WideBand stock is traded on the OTC.BB Market (ZWBC), and on the Frankfurt
Exchange (Stock symbol WBD; German Security No. WKN-764536).
COMPARISON OF THE THREE MONTHS ENDED DECEMBER 31, 2002 TO THE THREE MONTHS
ENDED DECEMBER 31, 2001
Sales were up to $131,274 for the quarter ended December 31, 2002 from
$12,535 for the quarter ended December 31, 2001, as WideBand continues its
efforts to launch the Company's products.
LIQUIDITY AND CAPITAL RESOURCES
The Company generates cash through the sale of its networking products and
its securities.
Cash decreased as of December 31, 2002 compared to September 30, 2002 in
part due to the expenses related to WideBand's presence at several industry
trade shows. Cash was also used by operations to manufacture goods for sale.
Included in these costs are the purchase of raw materials inventory and the
maintenance of manufacturing and testing equipment.
The Company has no financing through borrowings and as such has no
long-term debt or associated interest expense.
The Company requires funds for continuing research and development. This
requirement will continue as WideBand Corporation is committed to the research
and development of new products to keep the Company vital.
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(b) Reports on Form 8-K.
There were no Form 8-K reports filed this quarter.
4
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
By: _____/s/ Roger E. Billings_____________________ Date: February 13, 2002
Dr. Roger E. Billings, President, CEO, Director
By: _____/s/ Julie Williams_______________________ Date: February 13, 2002
Julie Williams, CFO
5
Attachment A.1
Form of Certification for Form 10-QSB
I, Dr. Roger E. Billings, President of the Company, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of WideBand;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with
respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
__/s/ Roger E. Billings_______
Dr. Roger E. Billings
President
February 13, 2002
Attachment A.2
Form of Certification for Form 10-QSB
I, Julie Williams, CFO of the Company, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of WideBand;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with
respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
__/s/ Julie Williams_______
Julie Williams
CFO
February 13, 2002
EXHIBIT 99.1
CERTIFICATION PURSUANT TO
18 U.S.C.SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of WideBand Corporation on Form 10-QSB
for the period ended December 31, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Dr. Roger E.
Billings, CEO, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to
ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operation of the
Company.
__/s/ Roger E. Billings_______
Dr. Roger E. Billings
President
February 13, 2002
EXHIBIT 99.2
CERTIFICATION PURSUANT TO
18 U.S.C.SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of WideBand Corporation on Form 10-QSB
for the period ended December 31, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), I, Julie Williams, CFO,
certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operation of the
Company.
__/s/ Julie Williams_______
Julie Williams
CFO
February 13, 2002
WIDEBAND CORPORATION
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
Condensed Consolidated Balance Sheets - December 31, 2002 and
September 30, 2002 (Unaudited) . . . . . . . . . . . . . . . . . . . . . .F-1
Condensed Consolidated Statements of Operations for the Three Months
Ended December 31, 2002 and 2001 (Unaudited). . . . . . . . . . . . . . . .F-2
Condensed Consolidated Statements of Cash Flows for the Three Months
Ended December 31, 2002 and 2001 (Unaudited). . . . . . . . . . . . . . . .F-3
Notes to Condensed Consolidated Financial Statements (Unaudited). . . . . .F-4
WIDEBAND CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, September 30,
2002 2002
------------- -------------
<s> <c> <c>
ASSETS
Current Assets
Cash and cash equivalents. . . . . . . . . $ 192,660 $ 273,838
Trade accounts receivables . . . . . . . . 20,605 18,295
Inventory. . . . . . . . . . . . . . . . . 232,567 262,548
Prepaid expenses . . . . . . . . . . . . . 328 721
------------ ------------
Total Current Assets. . . . . . . . . 446,160 555,402
Property and Equipment. . . . . . . . . . . . . 591,191 591,191
Less: accumulated depreciation . . . . . . (86,109) (80,068)
------------ ------------
Net Property and Equipment. . . . . . 505,082 511,123
Patents, net of amortization of $20,189 and
$9,531, respectively. . . . . . . . . . . . . 57,855 68,513
------------ ------------
Total Assets. . . . . . . . . . . . . . . . . . $ 1,009,097 $ 1,135,038
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Trade accounts payable . . . . . . . . . . $ 19,179 $ 48,573
Accrued liabilities. . . . . . . . . . . . 7,294 8,795
------------ ------------
Total Current Liabilities . . . . . . 26,473 57,368
------------ ------------
Stockholders' Equity
Common Stock - $0.01 par value;
20,000,000 shares authorized;
13,488,595 shares outstanding. . . . . . 134,886 134,886
Additional paid-in capital . . . . . . . . 5,035,601 5,035,601
Accumulated deficit. . . . . . . . . . . . (4,187,863) (4,092,817)
------------ ------------
Total Stockholders' Equity. . . . . . 982,624 1,077,670
------------ ------------
Total Liabilities and Stockholders' Equity. . . $ 1,009,097 $ 1,135,038
============ ============
See the accompanying notes to condensed consolidated financial statements.
F-1
WIDEBAND CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months
Ended December 31,
----------------------------
2002 2001
------------- -------------
<s> <c> <c>
Sales . . . . . . . . . . . . . . . . . . . . . $ 131,274 $ 12,535
Cost of Sales . . . . . . . . . . . . . . . . . 112,319 5,653
------------ ------------
Gross Profit . . . . . . . . . . . . . . . 18,955 6,882
Expenses
Research and development . . . . . . . . . 38,183 33,089
Selling and general and administrative . . 76,382 75,300
------------ ------------
Total Expenses . . . . . . . . . . . . . . 114,565 108,389
------------ ------------
Loss From Operations. . . . . . . . . . . . . . (95,610) (101,507)
------------ ------------
Other income. . . . . . . . . . . . . . . . . . 564 2,069
------------ ------------
Net Loss. . . . . . . . . . . . . . . . . . . . $ (95,046) $ (99,438)
============ ============
Basic and Diluted Loss Per Share. . . . . . . . $ (0.01) $ (0.01)
============ ============
Weighted Average Number of Common
Shares Used in Per Share Calculation. . . . . 13,488,595 13,122,345
============ ============
See the accompanying notes to condensed consolidated financial statements.
F-2
WIDEBAND CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended
December 31,
2002 2001
------------ ------------
<s> <c> <c>
Cash Flows From Operating Activities
Net loss . . . . . . . . . . . . . . . . . . . . . . . $ (95,046) $ (99,438)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization . . . . . . . . . 16,699 7,370
Changes in operating assets and liabilities:
Trade receivables . . . . . . . . . . . . . . . (2,310) 7,234
Prepaid expenses. . . . . . . . . . . . . . . . 393 346
Inventory . . . . . . . . . . . . . . . . . . . 29,981 (91,280)
Accounts payable. . . . . . . . . . . . . . . . (29,394) 4,677
Accrued liabilities . . . . . . . . . . . . . . (1,501) (2,535)
----------- -----------
Net Cash and Cash Equivalents Used in
Operating Activities. . . . . . . . . . . . . (81,178) (173,626)
----------- -----------
Cash Flows From Investing Activities
Payments for patents . . . . . . . . . . . . . . . . . - (1,572)
----------- -----------
Net Cash and Cash Equivalents Used in
Investing Activities. . . . . . . . . . . . . - (1,572)
----------- -----------
Cash Flows From Financing Activities
Deposits received on private placement offering. . . . - 50,000
----------- -----------
Cash and Cash Equivalents Provided by
Financing Activities. . . . . . . . . . . . . - 50,000
----------- -----------
Net Decrease in Cash. . . . . . . . . . . . . . . . . . . (81,178) (125,198)
Cash and Cash Equivalents At Beginning of Period. . . . . 273,838 502,359
----------- -----------
Cash and Cash Equivalents At End of Period. . . . . . . . $ 192,660 $ 377,161
=========== ===========
See the accompanying notes to condensed consolidated financial statements.
F-3
WIDEBAND CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1- INTERIM FINANCIAL STATEMENTS
The accompanying financial statements have been prepared by WideBand
Corporation (the Company) and are unaudited. In the opinion of management, the
accompanying unaudited financial statements contain all necessary adjustments
for fair presentation, consisting of normal recurring adjustments except as
disclosed herein.
The accompanying unaudited interim financial statements have been condensed
pursuant to the rules and regulations of the Securities and Exchange
Commission; therefore, certain information and disclosures generally included
in financial statements have been condensed or omitted. These financial
statements should be read in connection with the Company's annual financial
statements included in the Company's annual report on Form 10-KSB as of
September 30, 2002. The financial position and results of operations of the
interim periods presented are not necessarily indicative of the results to be
expected for the year ended September 30, 2003.
Business Condition- The accompanying financial statements have been prepared on
a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the ordinary course of business. As shown in
the financial statements, the Company has sustained net losses of $95,046 and
$99,438 during the three months ended December 31, 2002 and 2001, respectively.
In addition, operating activities have used cash of $81,178 and $173,626 during
the three months ended December 31, 2002 and 2001, respectively. The Company's
ability to continue as a going concern is dependent upon its ability to
generate sufficient cash flows to meet its obligations on a timely basis, to
obtain additional financing as may be required, and ultimately to attain
profitable operations.
Recoverability of Long-Lived Assets - SFAS No. 144, "Accounting for Impairment
or Disposal of Long-Lived Assets," requires the Company to test its long-lived
assets for recoverability whenever events or changes in circumstances indicate
that their carrying amount may not be recoverable. Such events include a
current-period operating or cash flow loss combined with a history of operating
or cash flow losses. As a result, the Company assessed the recoverability of
the carrying value of its property, equipment and patents at December 31, 2002
and, based on estimated undiscounted net future cash flows, management has
determined that the long-lived assets of the Company continue to be
recoverable.
NOTE 2- PATENTS
The Company adopted the provisions of SFAS No. 142 on October 1, 2002. As of
December 31, 2002 and September 30, 2002, the gross carrying amount of the
patents was $78,044 and accumulated amortization was $20,189 and $9,531,
respectively. Patents are amortized on a straight-line basis over their
estimated useful lives. At September 30, 2002, the Company reassessed the
useful lives of its patents and estimated the useful lives to be from one month
to three years based on the expected life of the Company's products that use
each patent. Prior to this assessment, the patents were amortized over a
fifteen-year period. Patent amortization expense was $10,657 and $659 during
F-4
the three months ended December 31, 2002 and 2001, respectively and $3,965 and
$2,576 during the years ended September 30, 2002 and 2001, respectively.
As of October 1, 2002 and December 31, 2002, the weighted-average estimated
remaining amortization period for the patents was 1.3 years and 1.5 years,
respectively. Management estimates that the patents will not have any
significant residual value at the end of their estimated useful lives. As of
December 31, 2002, estimated future amortization expense for patents for each
of the following three years is as follows:
For the Period Ending September 30:
-----------------------------------
<s> <c>
2003. . . . . . . . . . . . . . . . . $ 21,632
2004. . . . . . . . . . . . . . . . . 18,677
2005. . . . . . . . . . . . . . . . . 17,546
The carrying values of the Company's patents are reviewed for impairment
whenever events or changes in circumstances indicate that they may not be
recoverable. If such an event were to occur, the Company would project
undiscounted cash flows to be generated from the use of the patents and their
eventual disposition over the remaining life of the asset. If projections were
to indicate that the carrying value of the long-lived asset would not be
recoverable, the carrying value of the patents would be reduced by the
estimated excess of the carrying value over the projected discounted cash
flows. The Company's assessment of the recoverability of the carrying value of
the patents at December 31, 2002 concluded that there is no requirement to
recognize impairment on the patents. However, should the Company's marketing
and sales plans not materialize, the realization of the Company's patents could
be severely and negatively impacted.
The effects on net loss and basic and diluted loss per share of the change in
the estimated useful lives of the patents for the three months ended December
31, 2002 and 2001 and for the years ended September 30, 2021 and 2001 is as
follows:
For the Three Months Ended For the Years Ended
December 31, September 30,
-------------------------- -------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
<s> <c> <c> <c> <c>
Net loss, as reported . . . . . . $ (95,046) $ (99,438) $ (859,525) $ (375,517)
Adjust patent amortization. . . . -- (4,331) (28,826) (17,383)
----------- ----------- ----------- -----------
Net loss, as adjusted . . . . . . $ (95,046) $ (103,769) $ (888,351) $ (390,900)
=========== =========== =========== ===========
Basic and diluted loss per share:
Net loss, as reported. . . . . $ (0.01) $ (0.01) $ (0.06) $ (0.03)
Net loss, as adjusted. . . . . $ (0.01) $ (0.01) $ (0.07) $ (0.03)
=========== =========== =========== ===========
F-5